Gold Retreats from 5000 Mark: Why Failed to Serve as Safe Haven Amid Geopolitical Crisis?

As the Middle East situation escalates, Brent crude oil remains at a high of $100 per barrel. Traditionally, geopolitical conflicts tend to boost gold’s crisis premium. However, in this round of conflict, gold has shown a clear weakening trend and has not fully demonstrated its safe-haven properties. Facing ongoing geopolitical risks between the U.S. and Iran, gold experienced a significant pullback at the onset of the conflict: on March 3, it plummeted 4.38%, breaking below the $5,000 per ounce level, marking the largest single-day decline since January 2026; by March 18, gold prices had fallen over 6% from before the conflict erupted and are currently consolidating around $5,000 per ounce; the gold-to-oil ratio has been steadily declining from its recent highs.

Meanwhile, the market is replaying the script from the early stages of the 2022 Russia-Ukraine conflict, with risk assets and safe-haven assets experiencing simultaneous sell-offs. The dollar continues to strengthen, while gold, U.S. Treasuries, and the Swiss franc weaken together. Market expectations for Fed rate cuts have significantly diminished, and higher, longer-term interest rate paths are being repriced, creating a reverse “Goldilocks” scenario similar to 2022. When market structures undergo drastic changes, correlations across assets invert. Safe-haven assets are being re-ranked internally: the dollar has replaced gold as the preferred safe asset, with funds flowing into the dollar system during rising uncertainty rather than into interest-free assets like gold; recently, however, U.S. Treasuries and U.S. stocks have re-correlated positively, and Treasuries have failed to serve as a safe haven.

Recently, gold and stocks have shown a high degree of synchronized movement, rising and falling together. Traditional stock-bond hedging and stock-gold hedging strategies have temporarily failed during tail risks. This indiscriminate liquidation often reflects extreme liquidity stress in the market, indicating a deep risk-off phase.

Contagion effects of liquidity de-leveraging and brief dollar strength

First, during the initial outbreak of conflict and the surge in stock market volatility, gold is often caught in a deleveraging wave of selling everything, with investors selling gold to meet margin calls, serving as a liquidity source. When the VIX fear index spikes sharply, and investors face margin pressures, Value at Risk (VaR) shocks, and portfolio rebalancing needs, they tend to sell highly liquid assets first to raise cash. Due to its high liquidity, gold often becomes the primary target for liquidation.